New Delhi, Nov. 22: Consultants appointed by the government have suggested merger of the public sector telecom twins, Bharat Sanchar Nigam Ltd and Mahanagar Telecom Nigam Ltd.

BSNL operates all over the country except Delhi and Mumbai, which are MTNL territory.

The seven consultants have, however, asked the government not to rush the merger without first examining the financial implications. They have suggested six options, of which the government is considering two.

“The proposals were received from the consultants in late October. We have finalised two options, one of which will be chosen by the year-end. We are examining whether MTNL can acquire BSNL’s assets in a phased manner or take controlling stake,” a BSNL official said.

Other scenarios suggested by the consultants are that status quo be maintained, an alliance between the two, MTNL merging into BSNL and BSNL merging into MTNL.

To strengthen the two companies, now opened to private competition, the government had appointed McKinsey, JM Morgan Stanley, ABN Amro Rothschild and AF Ferguson, DSP Merrill Lynch, JP Morgan, HSBC Security and Capital Marketing, and KPMG Consulting.

The government also proposes to trifurcate the merged entity, each handling the separate business segments — basic telephony, cellular and long-distance (STD and ISD) services. The next step is to divest from the companies. But it is not know whether the trifurcation will take place before the divestment. The disinvestment ministry will have to make that decision in consultation with the communications ministry.

According to a Telecom Commission member, the process of assessing the value of BSNL alone is likely to take more than two years. After that, the report will have to be studied by the ministry before it is given final shape.

“It is too premature to comment on the structure and the final model that will be adopted. Divestment is a process that will have to be decided at a later stage after the government formalises its decision on merger,” the member said.

The government owns the entire stake of BSNL, which is one of the largest public sector undertakings with a net worth of Rs 60,000 crore, authorised capital of Rs 10,000 crore and paid-up capital of Rs 5,000 crore.

Its cumulative investment in gross fixed assets totals over Rs 90,000 crore and is expected to cross Rs 107,411 crore. BSNL has fixed assets in the form of land, buildings, cables, apparatus and plants and other infrastructure. Turnover in 2001-02 was close to Rs 24,000 crore, which was an 18 per cent increase over the previous year.

In MTNL, the government holds 56.25 per cent and the remaining is owned by foreign institutional investors, financial institutions, banks, mutual funds and others.